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Due to Coronavirus, Estée Lauder Sales Slip 11%

"We stand ready to leverage the recovery when stores reopen and consumers restock at home."

The coronavirus has ended the years-long gains of the Estée Lauder Cos. Inc.

For its third fiscal quarter, ended March 31, the company posted an 11 percent year-over-year sales decline, with $3.35 billion in net sales, with a net loss of $6 million. In the prior year, Lauder posted $555 million in net earnings in the quarter.

Lauder’s numbers were affected by the spread of COVID-19, which caused retail channels and its biggest growth drivers to close down. The business had been on a hot streak for the past few years, largely thanks to growth in travel retail and China, which have both been majorly affected by the pandemic. The business also recorded a $346 impairment charge across Too Faced, Glamglow, Becca, Smashbox, and certain freestanding stores impacted from COVID-19.

The news for Lauder this quarter was not all bad — Have & Be Co., the parent company of Dr. Jart+ — contributed 2 percentage points to sales growth, now that the acquisition has closed. And Lauder president and chief executive officer Fabrizio Freda called out the Estée Lauder brand, Darphin and Le Labo as solid growth drivers during the quarter, despite shifts in circumstances.

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“While the terrific double-digit momentum in sales growth from the first half of our fiscal year carried into January, the dynamics in the quarter changed significantly as COVID-19 spread beyond Asia. By early March, consumers around the world began social distancing, which resulted in lower traffic in retail locations. As March evolved, most retail stores temporarily closed and consumers increasingly stayed home. In this very complex and unprecedented environment, there were several bright spots across our portfolio, which drove global prestige beauty share expansion in the quarter,” Freda said.

In addition to brands that grew, the group saw double-digit increases in online sales, and rebounds in China and travel retail, Freda said.

“Our diverse portfolio of categories, channels and geographies affords us the needed agility to navigate through this environment and emerge strongly. We stand ready to leverage the recovery when stores reopen and consumers restock at home,” Freda said.

Lauder has undertaken cost savings initiatives, including furloughing U.S. point of sale employees and asking those higher up on the executive chain to take pay cuts. On top of initiatives the company had already taken to cut advertising spending, travel costs and hiring, Lauder expects to reduce operating expenses by $500 million to $600 million in the fiscal fourth quarter. Capital investments will be reduced by $250 million to $300 million for the fiscal year. The company has also raised $2.2 billion in cash, part from drawing down a credit facility, and part from issuing $700 million in senior unsecured notes.

Lauder has established a handful of philanthropic initiatives related to COVID-19, including donating hand sanitizers to medical workers and donating funds to Doctors Without Borders. The company also announced a fund for employees called the ELC Cares Employee Relief Fund, which is funded by the company and the Lauder family, for employees whose lives have been impacted by the pandemic.

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